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Bank of Scotland fined £45.5m by regulator over Reading fraud Bank of Scotland fined £45.5m by regulator over Reading fraud
(about 1 hour later)
The City regulator has fined Bank of Scotland £45.5m for failures to disclose information on the £245m fraud scandal at the bank’s Reading branch. The City regulator has fined Bank of Scotland £45.5m for failing to disclose information on the £245m fraud scandal at the bank’s Reading branch for two years after signs were first discovered.
The Financial Conduct Authority (FCA) said that Halifax Bank of Scotland (HBOS), which is now owned by Lloyds Banking Group, had “risked substantial prejudice to the interests of justice” by withholding information for two years. The Financial Conduct Authority (FCA) said that Halifax Bank of Scotland (HBOS), which is now owned by Lloyds Banking Group, had “risked substantial prejudice to the interests of justice” by withholding information.
The fine is in relation to a scheme by managers at HBOS’s Reading branch that drained the bank and small businesses of about £245m and left hundreds of people in severe financial difficulties. The fine is in relation to a scheme by managers at HBOS’s Reading branch that drained the bank and small businesses of about £245m and left hundreds of people in severe financial difficulties. The fine was reduced by almost £20m because the bank agreed to settle.
The FCA also on Friday banned four individuals from working in financial services – two years after they were convicted of fraud and sent to prison. They are Lynden Scourfield, Mark Dobson, Alison Mills and David Mills. HBOS first identified suspicious behaviour in its impaired assets team – which handled struggling business – in early 2007 but failed to notify regulators fully until July 2009.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent.​​​​​ BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police. The FCA said there had been “insufficient challenge, scrutiny or inquiry across the organisation and from top to bottom” but said that it had found no evidence that anyone had considered the consequences of not telling authorities about the suspicions.
Lloyds bought HBOS in September 2008, at the height of the financial crisis. While the acquisition made the newly formed Lloyds Banking Group the dominant player on the British high street, it also proved deeply problematic and the government was forced to bail out the bank.
The fallout from the Reading fraud has lasted for more than a decade, with victims highly critical of the bank’s handling of the scandal and “derisory settlements”. Victims have been offered packages ranging from less than £100,000 to more than £5m.
Lloyds also held out for years against the publication of a highly critical whistleblower report, which was eventually leaked.
On Friday the FCA also banned four individuals from working in financial services – two years after they were convicted of fraud and sent to prison. They are Lynden Scourfield, Mark Dobson, Alison Mills and David Mills.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent.​​​​​ BOS’s failures caused delays to the investigations by both the FCA and Thames Valley police.
“There is no evidence anyone properly addressed their mind to this matter or its consequences. The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.”“There is no evidence anyone properly addressed their mind to this matter or its consequences. The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.”
More to follow António Horta-Osório, Lloyds Banking Group’s chief executive, apologised for the “dark period in HBOS’s history”.
He said: “I want to apologise once again for the very deep distress caused to the customers affected by the HBOS Reading fraud. The perpetrators of the fraud rightly went to jail for the crimes they committed. The group’s management team has been committed to putting things right.”
Horta-Osório added that Lloyds has offered compensation to victims of the fraud, with 98% of those offers so far accepted. Lloyds has appointed a former high court judge, Sir Ross Cranston, to run an independent review of the compensation.
BankingBanking
Financial Conduct AuthorityFinancial Conduct Authority
Lloyds Banking GroupLloyds Banking Group
RegulatorsRegulators
HBOSHBOS
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